Why Online Sneaker Stores Are Making Your Retail Experience Better

The way we buy shoes is changing.  Shoe retailers are committed to putting consumers in an environment where they feel comfortable. As well, the big two shoe manufacturers (Nike and adidas) have pulled the ability of some small Mom & Pop accounts around the world to sell their shoes.  This decision is spurred on by the high cost and low return associated with some of those small retail relationships, and the lack of control the companies have in their product’s presentation in these stores. The big sportswear companies are finding it increasingly easier to focus all of their efforts on their own stores (where they make the most money and have the most control); similarly, they can institute changes with the major retail chains as they can institute immediate marketing or merchandising changes across all stores with the flip of a switch. With retail changing and buyers consuming across different platforms, the times are changing, and the companies that act rather than react will see their bottom lines grow.

Why Online Sales Are Ruining Everything for Retailers

Before we get started looking into the retail landscape, I think it’s important to break down where your money goes when you buy a shoe. Typically the (very simple) breakdown on a $100 pair of shoes looks like this:

  • $25-$30 in costs associated with getting the shoe made and delivered.
  • $25-$30 in costs associated with sales, marketing, R&D, endorsements, and other costs not associated with making a shoe.
  • $40-$50 in profit for the retailer.

As you can see, a huge chunk of money (40-50%) of every sale goes to the retailer which in a lot of cases is not the company that made the shoe. Now if Nike, adidas, or a retailer can convince a consumer to buy a pair of shoes from their company website or its own bricks and mortar location then it yields more sales and profits for that specific company. This is why you can easily find a 15-20% off coupon for one of the big 2′s own stores. The thought process here being even if the shoe only yields a company $80 in revenue it is still $30 more than they would have got before. Combine that with effective new methods of shipping and benefits to the consumer like next day shipping, and not paying state or provincial sales tax and you have created a reason for consumer to buy online. For the consumer you are now paying $20 less on a pair of shoes by doing very little work, and even enjoying delivery to your house. For Nike or adidas you are making $30 more by not sharing profit with a retailer. It’s essentially a win-win for everyone except for those retailers who are left with trying to compete for consumer with significantly less stock and a lot less pricing power. This means the retailers have to come up with creative and smart ways to get customers to buy from them. E-Commerce is growing at an alarming rate for Nike and adidas with growth rates of 42% and 58% in the last year respectively. Both companies have lofty goals in the online marketplace, and, with the online marketplace accelerating in growth countries like China, it makes sense that there is a focus on this spectrum. Consumers are comfortable buying from online retailers, and this makes it easier for shoe manufacturers to justify closing under-performing and less than premium accounts. Expect online sales to grow and grow as retailers grow their e-commerce teams, offerings, and experiences.

Nike and adidas Getting into Bed with the Big Dogs

When adidas launched the Pure Boost it seemed like everyone was desperate to get a pair. In Europe the release only hit Foot Locker locations. Along with five exclusive colourways for the ZX Flux, it seemed/seems like adidas was/is focused on getting the world’s second largest footwear buyer (behind France-based Decathlon Group) to push its products. Although the reach of Foot Locker and the fact that its 604 European locations stretch well beyond the reach of Europe’s top boutiques there wasn’t a way to be able support local boutiques. The move in the end was great for getting shoes on to people’s feet, and appealing the silhouettes to a different clientele that might not see them if they were at a street wear or sneaker boutique.

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(Photo courtesy of www.sneaker.794mhz.jp)

For big retailer chains like Foot Locker, Finish Line, and Champs the target is the mass market, and they look to sneakerheads as a small slice of their sales base. The boutiques are serving the 5% of the sneaker market that consider themselves devotees to athletic footwear while the big retailers serve the rest of the world. Obviously, all retailers are fans of consumers that will camp overnight to pay for their products so as much as Foot Locker could likely survive without getting any Jordan release or exclusive adidas’ they would never want to. They have the beauty of being the second largest buyer of athletic footwear in the world, and as a result they can call the shots for a lot of the relationship. It makes it easy for them to demand exclusives and access to any model and colourway they want with all that bargaining power. Obviously, it is in the best interest for the suppliers of footwear to not anger their biggest account, and as such you can expect to see more and more sneakerhead targeted silhouettes across all brands on the shelves of a Foot Locker and it’s competitors since they result in huge sales numbers. But then again, maybe not.  Foot Locker has built up its House of Hoops concept which is a premium chain store that has a similar feel to a boutique, and is geared towards sneakerheads and elite athletes. Foot Locker is seeing value in enhancing its retail presence, and Ken Hicks has made splashes with other ideas like the Flight 23 NYC store in collaboration with Foot Locker owned Foot Action. In cities that can support these premium stores they become the epicenter for sneakers, and the shops are moving to push the sneakerheads there by limiting releases to those locations. The big dogs are seeing a trend moving towards premium locations and buying experiences, and the sneaker world and sneakerheads are happy to follow along.

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(Photo courtesy of http://www.lightworks.co.uk)

Making Company-Owned Stores More Premium

Whether it’s adding the “boyfriend bench”, free drinks, a live DJ, or Wi-Fi, companies and retailers are figuring out that they need to not only have wares people want to buy, but they need to create an experience that consumers enjoy. The theory is simple: keep people in your store, and they will spend more money. This theory is confirmed by Seth Fiegerman in his article on MSN Money here. As I previously mentioned, stores are attempting to make the shopping experience comfortable, premium, and enjoyable. They are also attempting to engage as many senses as possible as this can equal more sales. (*Side note* shout out to all the local shops that don’t engage with my sense of smell. Just walking by a Hollister is enough to make me gag). RTEmagicC_niketown-nyc-5thfloor-sportswear-1.jpg

(Image courtesy of High Snobiety)

Wi-Fi

Shops figured out years ago that engaging with appropriate music and letting people touch and feel shoes results in more and more sales. The same shops are looking now at bringing in free Wi-Fi to go along with the already comfortable experience. There are two main reasons why stores like adidas are bringing in Wi-Fi to their shops:

  1.  It really isn’t for the buyer, but it is more for the girlfriend, the friend, the brother, the sister, or whoever they are with. As soon as the other person is able to check a couple Snapchats then the buyer doesn’t feel bad looking at that second colourway.
  2. It lets the buyer research more and remove any pre-purchase dissonance (aka the voice in your head that says “you already have 6 pairs of Jordan 5′s, do you really need another?). By getting the opportunity to look again at prices online, reviews, and pictures of the shoes then the buyer becomes more comfortable with spending their hard earned cash.

Either way the addition of Wi-Fi in retail outlets has led to an increase of sales according to the people at Deloitte. You can expect to see iPads, and ways to access the online included in this as well so that you can order your size if it isn’t in stock or browse a larger range of products that you can pick up in store. Omnichannel offerings are no longer the future, but they are the present.

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(Image courtesy of http://www.philly.com)

In-Store Displays and Videos

Both adidas and Nike have been working hard to engage consumers with their content when they are susceptible to a sale. One great example is the Canadian boutique Livestock that in early 2014 had Nike come in and transform the adidas Consortium, and Reebok Certified account into a purely Nike store for a couple of weeks. The takeover let sneakerheads come in and take a serious look at things they might not look at like the Nike Tech pack. The display was incredibly well-executed and was the talk of the sneaker world on outlets like Sole Collector. This pop-up shop featured iPads that let consumers zoom in on the material of the Nike Tech pack which again engages the sense of sight even further. Couple all this with some re-releases of some seriously sought after pairs of shoes and you have the recipe for success. Check out a video that the nice people at Livestock put together below.

On the adidas side of things, the opening of the Bluewater HomeCourt shop showcased the adidas Shoebase. These two massive touchscreens help customers choose the right product for them and engage their senses again. The launch was coupled with a radio DJ and a nice discount to encourage consumers to come see the new store and really experience it. At the heart of what adidas was trying to accomplish is creating a unique and amazing retail experience. Like adidas HomeCourt Bluewater General Manager Robert Goodman said “The concept is quite unique and will make a significant contribution to the experience for guests“. The look and feel of the store is to make consumers feel like an elite athlete at any level. The entrance is through a tunnel like one that athletes go through seconds before they step on the pitch or the court. This is the second HomeCourt shop by adidas, and I wouldn’t be surprised to see more pop up in areas around the world. Whatever way that stores are trying to become premium it is clear that it is incredibly important to be seen as premium. The boutiques are (hopefully) always going to be around as they are the epicenter of sneaker culture in any given city. While the big brands own shops will be a lot more cookie cutter thanks to global and national regulations it is clear that the focus is on delivering a premium and consumer focused experience.  As adidas Global Head of Retail Environments Ted Mager said “Shopping for this generation is very social. They need to have a place to hang out. The longer the consumer stays in the store, the more likely they are to buy”. Create a fun, popping, and premium place then watch the profits roll in.

Also, shout out to Solebox and their Solebot. They just opened their new shop out in Berlin, and have brought forward the age of the robot with their stock searching robot arm. Check out the video below from the people at Reebok Classics, Solebox, and Patrick Mohr to get another idea of what premium shopping looks like.

Closing Stores that Aren’t Deemed “Premium” or Underperform

With a focus on creating premium stores and experiences that engage consumers senses the standard for what is considered acceptable under the standards of the big 2 is rising. In January, stores across the UK announced that they were having their ability to order product from the sportswear companies pulled out from under them. It was clear in this article by the Standard that the focus was to focus of Nike and adidas’ in this initiative was clearly on the shops that perform and push product at a commercial level. It’s unfortunate that there are stores with relationships spanning decades with the big 2 that are now forced to prove their mettle, but in a world where brand power sells shoes it is important to focus on what is moving product. To put it frankly, sales representatives only have a finite amount of time in the day, so if a store can’t meet the minimum quantity to justify the cost of time for that representative then it makes sense to focus their efforts in a place where they see more value. This also has occurred online. Until just a few days ago adidas restricted its online sellers to not include Amazon and EBay. They had disallowed sellers to use these channels with the worry of the brand not being presented in the right light. They recently reversed this call for sellers as long as they “adhere[d] to strict guidelines”. This is likely thanks to the massive growth in the online spectrum, and attributed that there products are showing up on the retailers either way.

Where the Retail Landscape is Going

A few predictions on where I expect the international retail landscape to go include:

  • Expect more Mom & Pop shops to shut down as they lose their Nike or adidas accounts.
  • Expect e-commerce to continue to grow as the next big part of the omni-channel ecosystem.
  • Expect mobile purchasing to continue to get easier and play a bigger part of how consumers buy.
  • Combining the online and retail experience. Whether it’s ordering product from iPads in stores, adding in-store pickup, or implementing creation centres for NIKEiD and miadidas
  • Look to the big retail and sportswear brands to continue to develop concept stores in retail locations around the world (focusing on the big cities like Paris, NYC, Berlin, Shanghai, Hong Kong, Tokyo, and Los Angeles).
  • More exclusive items for the big chain retailers as they flex their buying muscle.
  • More focus placed on making the consumer stay a while by engaging them. This is the area I expect the truly innovative companies and retailers to shine!

The retail landscape is changing. Consumers have the luxury of multiple choices of how and where they buy the latest sneakers. While I don’t think that Nike or adidas is going to lose the race anytime soon I do believe that the two horse race is going to be across more channels and will only intensify from here. Nike and adidas make each other better by competing with each other, because in the world of footwear competition breeds creation. This creation extends across a variety of fronts past just the actual shoes, and into the retail spectrum. This high level of competition has blown up with the growth in online retail, and is only poised to create more and more creative ways to buy creative shoes.

Who is Winning the World Cup by Someone who Doesn’t Really Get Football

Full disclosure, I’m a Canadian and I am trapped in a hotbed of German soccer  football fans. I not only don’t regularly watch football, but the only time I ever have gone to a professional game is because my friend gave me free tickets to the Vancouver Whitecaps. The tickets included a free stadium tour and it was leg day, so I figured I would probably walk a lot. Nonetheless I am not even close to an expert on anything to do with football but I do study the brands involved so I will look at it from my usual perspective.

 

adidas Sponsors FIFA until 2030.

Clearly having the ball that everyone is playing with and having your name on the sideboards that half the world will see is a powerful piece of advertising. We know that the cost of that was around 70 million dollars for 2014 but with adidas football revenue potentially crossing 2 billion dollars, it only cost at most 2.5% of all football revenues. This partnership will make it a lot harder for Nike to overtake adidas as the  dominant player in football for at least 2014. Point adidas.

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adidas Releases Half of a Commercial

When I was in school learning marketing one of the best definitions of what a “marketer” does is tell stories. The story that Nike released in it’s Winner Stays campaign is clear, funny, exciting, and appeals even to the fair-weather fan. From the get-go, I knew enough of the stars in the Nike film to understand who was who and even though they never explicitly said “FIFA World Cup” we all knew exactly what “major worldwide football event” they were risking everything for. More or less, I completely understood the story from start to end. The adidas spot was well put-together and had a great concept. It also received a ridiculous amount of overnight views (fueled mostly by the fact that it featured Kanye West’s unreleased track “God Level”)  but lacked a coherent story. The longer and more complete version of the advert was later released and it tells a story, but the Nike commercial still dominated the web. Point Nike.

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Nike Picks up 6 of the 10 Most Marketable Footballers

Compared to adidas’ 3 and Puma’s 1 Nike pulls far and away in this category. Especially by having Ronaldo who is the undisputed most marketable footballer according to Repucom. Point Nike.

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Nike Takes the Favourite, but adidas Bets the Spread.

If you take only the teams that adidas and Nike are backing and put them in a bubble so that the World Cup tournament is only 19 teams then you can get a very interesting view as to who better spent their hundreds of millions of dollars on teams for the World Cup. Most people who had to wager serious money are looking at four teams: Brazil, Argentina, Spain, and Germany. Brazil is partnered with Nike however the other three are with adidas. Although Brazil is the favourite, Nike has placed all of it’s eggs in one basket. In my opinion, I would rather be in adidas’ shoes as the overall odds are in their favour. Point adidas.

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adidas’ Brazuca Account Gains Followers

In the world of social media, both camps have been very successful. Perhaps, the biggest social highlight however was the creation of the cheeky and effective “brazuca” account on Twitter. The personified ball encourages engagement with both consumers and players. The value of real-time social media is incredibly evident with this account as it is relaying messages within seconds of results and events. The account easily passed 1 million followers on June 14th and is poised to keep growing over the course of the tournament. Also, according to Business Week adidas won Twitter the month before the World Cup. Point adidas.

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Final Score: adidas 3 Nike 2

It seems as if adidas has the early lead in this shootout, and as with the predicted sales for this year it looks like they will still win the football market. It’s quite early to predict who will win the World Cup from a company perspective, but with an estimated 70 million dollar sponsorship deal it is clear that adidas would love to see any final combination involving Argentina, Germany, or Spain. As much as I still don’t understand the beautiful game it is quite obvious that the world’s spotlight is on the world’s premiere footballers. The game has just begun, and it will be interesting to see what happens when the semifinals come around. The real brand champion my be crowned with the final match, but either way it’s going to be a fun ride en route.